Slow recovery in IT spending - TowerGroup

Slow recovery in IT spending - TowerGroup

IT spending by US commercial banks will grow slowly through to 2007, moving from a total of $33.8 billion in 2003 to $38.2 billion - a compound annual growth rate of just 3.3 per cent, according to the latest research by TowerGroup.

TowerGroup says consumer banking technologies will still command the lion's share of investment. In 2004, US banks will invest $22.8 billion in consumer banking technology, versus $8.02 billion for wholesale banking and $3.88 billion for payments.

According to the research, IT staffing will also remain flat through 2004 and banks will instead increase investments in hardware, software, outsourcing and professional services.

However, TowerGroup claims that 2004 is also the year when the industry will begin to see the tangible results of a range of long-term cost management projects, which will shift the dynamic between three core areas of bank IT investment - maintenance, replacement and new technology.

In 2003, US banks will focus more than 81 per cent of IT spending on maintaining existing technology infrastructures, with maintenance continuing to account for the bulk of IT investment through 2007.

But as efficiencies achieved through long-term cost management projects begin to take hold, TowerGroup says spending on maintenance will begin to decrease. By 2007, maintenance spending will have grown just over $1 billion from 2003, but will account for 75 per cent of total IT spending - a six per cent drop from 2003.

The decrease in maintenance spending will allow for growth in both replacement and new technology spending. By 2007, replacement investments will have grown from eight per cent of total IT spending to nearly 11 per cent. Also, new technology investments will have grown from nearly 11 per cent to just under 14 per cent.

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